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The 2014 Fidelity RIA Benchmarking Study

ria sFidelity Institutional Wealth Services, a leading custodian for registered investment advisor (RIA) firms, released findings from The 2014 Fidelity RIA Benchmarking Study,(1) which revealed many firms (2) recognize the need to improve when it comes to marketing and business development: only 5 percent feel their firms are advanced in these areas, and seven in 10 do not have a plan in place to guide them toward better business results, a number that has gone unchanged since 2011.(3)

The study looks at what may be holding RIAs back from advancing their marketing and business development efforts and explores the best practices of “High-Performing Firms (4)” to help RIAs learn from their peers.

According to the study, High-Performing Firms excel in the areas of growth, (5) productivity (6) and profitability. (7) And while many factors can contribute to their success, these firms stand out in several important areas of marketing and business development: firm story, targeting clients, referrals and aligning talent—strategies that may be contributing to their ability to close business in two or fewer meetings and drive more incremental growth than other firms.

“Three-fourths of firms see improving their marketing and business development as a top strategic initiative, but they are struggling to make progress,” said David Canter, executive vice president and head of practice management and consulting, Fidelity Institutional Wealth Services. “As firm leaders sit down to think through their 2015 strategic plans, they should consider looking to their peers for insights on what is working and ideas on where to focus to make the most impact.”

Key Findings of The 2014 Fidelity RIA Benchmarking Study:

1. High-Performing Firms are focused on telling a consistent firm story, while half of RIA firms are still struggling to establish one. Only 56 percent of all firms agree that they have a clearly defined and differentiated firm story, and only 43 percent agree their stories are tailored to the specific needs of target clients. High-Performing Firms are 1.7X times more likely to tell a consistent firm story, with all client and prospect-facing associates describing their firm and its key differentiators in the same way. As a result, High-Performing Firms are also more likely to agree that the majority of their clients know the fundamentals of their firm story, which can help clients become advocates for the firm.

2. While firms are making progress when it comes to targeting the right clients, High-Performing Firms are almost twice as likely to effectively communicate their target client profiles to help generate the right referrals. Firms with a target client profile reported that 90 percent of new clients added in 2013 fit this description, compared to only 75 percent of clients on board prior to 2013. High-Performing Firms are almost twice as likely to agree that they effectively describe their target client profiles to both clients and centers of influence (COI). This may help clients and COI identify the most appropriate referrals, which may lead to a higher percentage of clients fitting target client profiles over time.

3. Few firms have an “advanced” referral process; High-Performing Firms are four times as likely to leverage COI referrals to the fullest. Referrals from existing clients and centers of influence are important channels of growth for RIAs, accounting for 75 percent of all new clients. However, less than one-third of firms rate their referral processes as advanced, or even fairly strong. Only 14 percent agreed that they have analyzed their client base to focus on the clients most likely to make referrals. High-Performing Firms are 4X more likely to say their COI referral processes are advanced. This includes activities such as always thanking sources for referrals and working to understand their centers of influences’ target client profiles so they can send reciprocal referrals. In addition, they are more likely to review centers of influence data, such as referral status, at least monthly and keep data up to date.

4. High-Performing Firms have the talent and resources in place, while one-third of RIA firms are pursuing business development officers. High-Performing Firms are approximately twice as likely to be pursuing strategic initiatives to develop talent-management plans or change firm compensation plans—signs that they may be managing talent more proactively. They are also less likely to see lack of internal sales and marketing capabilities as an issue and, possibly as a result, are less likely to be hiring business development officers (81 percent not pursuing vs. 66 percent of other firms).


About Fidelity Investments

Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.1 trillion, including managed assets of $2.0 trillion as of November 30, 2014, we focus on meeting the unique needs of a diverse set of customers: helping 23 million people investing their own life savings, 20,000 businesses to manage their employee benefit programs, as well as providing 10,000 advisors and brokers with technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit


1. The 2014 Fidelity RIA Benchmarking Study (the “study”) was conducted between May 6 and June 30, 2014, in collaboration with an independent third-party research firm unaffiliated with Fidelity Investments. 411 firms participated. The experiences of the RIAs who responded to the study may not be representative of other RIAs and are not an indication of future success.

2. The terms ‘RIA’, ‘RIA firms’, and ‘firms’ refer only to those firms that participated in the study.

3. The 2011 Fidelity RIA Benchmarking Study was conducted between August 1 and September 26, 2011, in collaboration with an independent third-party research firm unaffiliated with Fidelity Investments. 375 firms participated. The experiences of the RIAs who responded to the study may not be representative of the experiences of other RIAs and are not an indication of future success.

4. The term “High-Performing Firms” refers to the subset of participating firms in the study with business results that met certain qualifying criteria further defined in the study findings report. Reference to the concept of “performing” in the name of this group is not intended to connote investment returns. Past performance is no guarantee of future results. High-Performing Firms are compared to All Other Eligible Firms, defined as the subset of participating firms who met certain eligibility requirements further defined in the study findings report, but who did not qualify as High-Performing Firms.

5. 3 year Assets Under Management (AUM) Compound Annual Growth Rate (2010-2013)

6. 2013 Revenue per Full-Time Equivalent (FTE)

7. 2013 Earnings Before Owners’ Compensation (EBOC) Margin; EBOC Margin = EBOC as a % of revenue


Posted by:  Steven Maimes, The Trust Advisor


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Year in Review: Wealth Management Ramps Up In Houston

Houston Business Journal article by Suzanne Edwards

houstonThe burgeoning wealth management market in Houston was typified when Capgemini and RBC Wealth Management released the 2014 United States Wealth Report in September, which showed Houston to have the second-fastest growing population of high-net worth individuals of all 12 metropolitan areas covered in the report.

Such wealth has caused banks to recalibrate to private banking and wealth management. Wells Fargo’s wealth management group zeroed in on The Woodlands, itching to take advantage of the $10 billion market, said Jeff Shipley, the group’s regional managing director, in an interview with the Houston Business Journal in May.

Houston’s wealthy also captured the attention of out-of-towners like New York-based Bessemer Trust, which opened an office in Houston in October. Nationally, Bessemer has nearly $98 billion under management and approximately 2,200 clients.

Most recently a Phoenix-based Heritage Advisors LLC told the Houston Business Journal in early December that it’s eyeing certified public accounting firms in Houston to acquire and give Heritage a foothold in the Bayou City.

But with all this stepped-up wealth management action, there have been some regulatory stumbles.

In November, Houston-based U.S. Capital Advisors LLC was ordered to pay a group of former clients and Exxon Mobil Corp. retirees $3.8 million all together by an arbitration panel with the Financial Industry Regulatory Authority for allegedly underperforming on a specific investment program. Pat Mendenhall, USCA CEO, later told the Houston Business Journal that the ruling was problematic for a number of reasons.

FINRA also had to keep pace with the fast-moving fluctuation of one James “Jeb” Bashaw after Boston-based LPL Financial discharged the well-known Houston broker for allegedly violating firm policies and industry regulations in September. Bashaw’s company, James E. Bashaw & Co. splintered and brokers in one of two directions: follow Bashaw’s daughter in leaving LPL Financial for Memphis-based Wunderlich Securities or leave Bashaw behind and stick with LPL Financial. Bashaw’s attorney, New York-based Anthony Paduano, told the Houston Business Journal that LPL’s allegations were false and defamatory and that Bashaw would reserve his right to sue the Boston broker dealer. Bashaw has since found a new home with International Assets Advisory LLC.


Posted by:  Steven Maimes, The Trust Advisor


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IRS Can Audit For Three Years, Six…Or Forever

Forbes article by Robert W. Wood 

irs taxIn most cases, the IRS has three years to audit after you file your return. If the IRS shows up after that, they may be too late.

Surprisingly, amending a return often does not change the three year limit. But many special rules can extend your audit purgatory.

The three years is doubled to six if you omitted more than 25% of your income. It’s also doubled if you omitted more than $5,000 of foreign income. Even worse, the IRS has no time limit if you never file a return. It is common to wonder whether reporting offshore accounts–or failing to–means an audit. How long must you wonder?

With foreign accounts, six years is typical, and in some cases, the IRS has no limit. An FBAR (also called FinCEN Form 114), is a disclosure form for reporting foreign accounts. FBARs have a separate audit period, generally six years. For unfiled tax returns, criminal violations or fraud, the limits can be longer. In most cases, the practical limit is six years, but for some information returns the IRS can audit forever.

You might think that if you fix your tax returns or FBARs, you would reduce your audit time. However, the answer varies with IRS disclosure options. The main IRS program for offshore accounts is the OVDP, and in that program, once your closing agreement is signed, you are truly done, with no audits thereafter. But with the IRS Streamlined programs, there is no closing agreement.

Both Domestic and Foreign Streamlined programs require three years of tax returns, six years of FBARs, and paying taxes and interest. You must certify under penalties of perjury that you were not trying to evade taxes. Overseas taxpayers can qualify for no penalty, while domestic taxpayers pay a 5% penalty.

Clearly, 5% is better than 27.5% in the OVDP, though the percentage is not the only difference. The IRS can audit Streamlined submissions. How long depends on:

  • Your overseas income;
  • Your unreported income; and
  • Whether you must file international information returns.

Each has a separate audit clock. If you have $5,000 or more of overseas income (say, interest on an overseas account), the IRS can audit up to six years from your original filing. Likewise, if you have a “substantial understatement” of income–25% or more–the IRS gets six years. International information returns, such as Form 3520 for gifts or inheritance from foreign nationals, or Form 8938 for overseas assets, give the IRS three years from filing those Forms.

Streamlined filers can have a mix of these audit clocks. Say Albert, Betty, Clyde and Delores each timely filed 2011 returns on April 15, 2012. None filed FBARs (the 2011 FBAR was due June 30, 2012). They all honestly did not know they had to report overseas income or file FBARs.

Each has exposure on their 2011 tax return until at least April 15, 2015 (three years), and until June 30, 2018 for FBARs (six years). Suppose that each one goes into the Streamlined program (Foreign or Domestic), and submits their amended tax returns and FBARs on December 25, 2014. For simplicity, we only consider one tax year, 2011.

Albert had overseas income of $5,000 in 2011. He didn’t substantially understate his income; and he didn’t owe international information returns for 2011. The last day the IRS can audit is April 16, 2018. The $5,000 of unreported overseas income gives the IRS six years from the original filing, not three. So filing Streamlined didn’t add or subtract audit time.

Betty had overseas income of $4,999, but had a substantial understatement (25%) of income (Betty did not include a 1099 from her independent contracting work). She owed no international information returns for 2011. The last day the IRS can audit is still April 16, 2018, because the substantial understatement gives the IRS an extra three years. Like Albert, the Streamlined submission didn’t add or subtract time.

Clyde had overseas income of $4,999 for 2011, and no substantial understatement of income. However, a Form 8938 was due (but not filed) with his 2011 return. The last day the IRS can audit is December 25, 2017. The Form 8938 information return gives the IRS three years from filing that information return. Clyde shortened his audit period via the Streamlined program, since the statute would not have run until 3 years after he filed the Form 8938.

Delores had overseas Income of $5,000 in 2011, a substantial understatement (25%) of income; and a Form 8938 was due (but not included) with her 2011 return. Delores triggered all three rules. The IRS can audit until April 16, 2018. Again, though, the statue on the Form 8938 would never run until she filed it, so she shortened the time via the Streamlined program.

The IRS pays close attention to audit deadlines. However, the Streamlined programs are still new so it is difficult to know when one is safe. The technical deadline in many cases may be six years, but in practice, the IRS is likely to audit sooner if at all. But whatever the final date, coming clean has fewer risks than staying quiet. Plainly, the OVDP is safest, making you bulletproof once it’s done.

Yet despite the audit risk, the Streamlined program is viable for many for whom the OVDP may be overkill. For those who truly weren’t willful, the Streamlined program can clean up the past and get FBARs filed. Given the size of potential FBAR penalties–exceeding your offshore account balance–get them filed and behind you.


Posted by:  Steven Maimes, The Trust Advisor


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How Successful People Squash Stress

Forbes article by Travis Bradberry

We all know that living under stressful conditions has serious physical and emotional consequences. So why do we have so much trouble taking action to reduce our stress levels and improve our lives? Researchers at Yale University have the answer. They found that intense stress actually reduces the volume of gray matter in the areas of the brain responsible for self-control.

As you lose self-control, you lose your ability to cope with stress. It becomes harder for you to keep yourself out of stressful situations, and you’re more likely to create them for yourself (such as by overreacting to people). It’s no wonder so many people get sucked into progressive rounds of greater and greater stress until they completely burn out (or worse).

stressDwindling self-control is particularly scary when you consider that stress affects physiological functions in the brain, contributing to chronic diseases like hypertension and diabetes. And stress doesn’t stop there—it’s linked to depression, obesity, and decreased cognitive performance.

The ability to manage your emotions and remain calm under pressure has a direct link to your performance. TalentSmart has conducted research with more than a million people, and we’ve found that 90% of top performers are skilled at managing their emotions in times of stress in order to remain calm and in control.

The tricky thing about stress is that it’s an absolutely necessary emotion. Our brains are wired such that it’s difficult to take action until we feel at least some level of this emotional state.

Research from UC Berkeley, reveals an upside to experiencing moderate levels of stress. But it also reinforces how important it is to keep stress under control. The study found that the onset of stress entices the brain into growing new cells responsible for improved memory. However, this effect is only seen when stress is intermittent. As soon as the stress continues beyond a few moments into a prolonged state, it suppresses the brain’s ability to develop new cells.

Intermittent stressful events actually increase your performance by keeping the brain more alert, and most top performers have well-honed coping strategies that they employ under stressful circumstances to lower their stress levels and ensure that the stress they experience is not prolonged. This keeps their performance up and the negative effects of stress to a minimum.

The complexity of the human brain gives us the ability to worry and perseverate on events, which can create frequent experiences of prolonged stress. Fortunately, though, unless a lion is chasing you, the bulk of your stress is subjective and under your control. The plasticity of your brain allows it to mold and change as you practice new behaviors. So implementing healthy stress-relieving techniques won’t just improve your performance—it can train your brain to handle stress more effectively and decrease the likelihood of ill effects.

While I’ve run across numerous effective strategies that successful people employ when faced with stress, what follows are 11 of the best. As simple as some of these strategies may seem, they are difficult to implement when your mind is clouded with stress. Force yourself to attempt them the next time your head is spinning, and your efforts will pay dividends to your health and performance.

They Say No

Research conducted at the University of California in San Francisco shows that the more difficulty that you have saying no, the more likely you are to experience stress, burnout, and even depression. Saying no is indeed a major challenge for most people. “No” is a powerful word that you should not be afraid to wield. When it’s time to say no, emotionally intelligent people avoid phrases like “I don’t think I can” or “I’m not certain.” Saying no to a new commitment honors your existing commitments and gives you the opportunity to successfully fulfill them.

They Appreciate What They Have

Taking time to contemplate what you’re grateful for isn’t merely the “right” thing to do. It also improves your mood, because it reduces the stress hormone cortisol by 23%. Research conducted at the University of California, Davis found that people who worked daily to cultivate an attitude of gratitude experienced improved mood, energy, and physical well-being. It’s likely that lower levels of cortisol played a major role in this.

They Avoid Asking “What If?”

“What if?” statements throw fuel on the fire of stress and worry. Things can go in a million different directions, and the more time you spend worrying about the possibilities, the less time you’ll spend focusing on taking action that will calm you down and keep your stress under control. Successful people know that asking “what if? will only take them to a place they don’t want—or need—to go.

They Disconnect

Given the importance of keeping stress intermittent, it’s easy to see how taking regular time off the grid can help keep your stress under control. When you make yourself available to your work 24/7, you expose yourself to a constant barrage of stressors. Forcing yourself offline and even—gulp!—turning off your phone gives your body a break from a constant source of stress. Studies have shown that something as simple as an email break can lower stress levels.

Technology enables constant communication and the expectation that you should be available 24/7. It is extremely difficult to enjoy a stress-free moment outside of work when an email that will change your train of thought and get you thinking (read: stressing) about work can drop onto your phone at any moment. If detaching yourself from work-related communication on weekday evenings is too big a challenge, then how about the weekend? Choose blocks of time where you cut the cord and go offline. You’ll be amazed at how refreshing these breaks are and how they reduce stress by putting a mental recharge into your weekly schedule. If you’re worried about the negative repercussions of taking this step, first try doing it at times when you’re unlikely to be contacted—maybe Sunday morning. As you grow more comfortable with it, and as your coworkers begin to accept the time you spend offline, gradually expand the amount of time you spend away from technology.

They Limit Their Caffeine Intake

Drinking caffeine triggers the release of adrenaline. Adrenaline is the source of the “fight-or-flight” response, a survival mechanism that forces you to stand up and fight or run for the hills when faced with a threat. The fight-or-flight mechanism sidesteps rational thinking in favor of a faster response. This is great when a bear is chasing you, but not so great when you’re responding to a curt email. When caffeine puts your brain and body into this hyperaroused state of stress, your emotions overrun your behavior. The stress that caffeine creates is far from intermittent, as its long half-life ensures that it takes its sweet time working its way out of your body.

They Sleep

I’ve beaten this one to death over the years and can’t say enough about the importance of sleep to increasing your emotional intelligence and managing your stress levels. When you sleep, your brain literally recharges, shuffling through the day’s memories and storing or discarding them (which causes dreams), so that you wake up alert and clear-headed. Your self-control, attention, and memory are all reduced when you don’t get enough—or the right kind—of sleep. Sleep deprivation raises stress hormone levels on its own, even without a stressor present. Stressful projects often make you feel as if you have no time to sleep, but taking the time to get a decent night’s sleep is often the one thing keeping you from getting things under control.

They Exercise

Getting your body moving for as little as 10 minutes releases GABA, a neurotransmitter that reduces stress by soothing you and helping you stay in control of your emotions. Exercise is one of the first things busy people let fall by the wayside when they are stressed and under a lot of pressure. Once you understand that exercising is going to make you feel better and help you to get more done by lowering your stress levels, that should be all the motivation you need to make it happen.

They Don’t Hold Grudges

The negative emotions that come with holding onto a grudge are actually a stress response. Just thinking about the event involved sends your body into fight-or-flight mode. When a threat is imminent, this reaction is essential to your survival, but when a threat is ancient history, holding onto that stress wreaks havoc on your body and can have devastating health consequences over time. In fact, researchers at Emory University have shown that holding onto stress contributes to high blood pressure and heart disease. Holding onto a grudge means you’re holding onto stress, and emotionally intelligent people know to avoid this at all costs. Learning to let go of a grudge will not only make you feel better now but can also improve your health.

They Don’t Die in the Fight

Emotionally intelligent people know how important it is to live to fight another day. In conflict, unchecked emotion makes you dig your heels in and fight the kind of battle that can leave you severely damaged and stressed. When you read and respond to your emotions effectively, you’re able to choose your battles wisely and only stand your ground when the time is right.

They Practice Mindfulness

Mindfulness is a simple, research-supported form of meditation that is an effective way to gain control of unruly thoughts and behaviors. People who practice mindfulness are more focused, even when they are not meditating. It is an excellent technique to help reduce stress because it allows you to reduce the feeling of being out of control. Essentially, mindfulness helps you stop jumping from one thought to the next, which gives you laser-sharp focus and keeps you from ruminating on negative thoughts. Buddhist monks appear calm and in control for a reason. Give it a try.

They Squash Negative Self-Talk

A big, final step in managing stress involves stopping negative self-talk in its tracks. The more you ruminate on negative thoughts, the more power you give them. Most of our negative thoughts are just that—thoughts, not facts. When you find yourself believing the negative and pessimistic things your inner voice says, it’s time to stop and write them down. Literally stop what you’re doing and write down what you’re thinking. Once you’ve taken a moment to slow down the negative momentum of your thoughts, you will be more rational and clear-headed in evaluating their veracity.

You can bet that your statements aren’t true any time you use words like “never,” “worst,” “ever,” etc. If your statements still look like facts once they’re on paper, take them to a friend or colleague you trust and see if he or she agrees with you. Then the truth will surely come out. When it feels like something always or never happens, this is just your brain’s natural threat tendency inflating the perceived frequency or severity of an event. Identifying and labeling your thoughts as thoughts by separating them from the facts will help you escape the cycle of negativity and move toward a positive new outlook.

I am author of the bestselling book Emotional Intelligence 2.0 and cofounder of TalentSmart, the world’s #1 provider of emotional intelligence tests and training, serving 75% of Fortune 500 Companies.


Posted by:  Steven Maimes, The Trust Advisor

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What to Do When Your Financial Adviser Retires

NYT article by Paul Sullivan

blocksFinancial advisers as a group are aging and that means many of them are about to retire or transfer their practices to someone younger, just as doctors, dentists and other professionals do.

But for clients who have worked with the same adviser for decades — and may be close to the adviser in age and outlook — the change could come just when they need that person the most: to help them financially manage their own retirement.

A lot is riding on how an adviser handles the transition, and clients need to be prepared to ask hard questions — or even find a new adviser if the conversation does not go well.

“If clients ask what their succession plans are and if the answer is ‘Don’t worry about it I’ll live forever,’ that’s a terrible answer,” said Ruediger Adolf, founder and chief executive of Focus Financial Partners. “If there is no next generation of advisers around, they’re not doing their jobs. They’re not protecting their client.”

Joseph H. Clinard Jr. has been a broker for more than 50 years. The average financial adviser in the United States is older than 50, as relatively few young people are interested in the work.A Hunt to

Mr. Adolf has a lot to gain from this belief. His firm was created in part to serve as a source of capital for advisers with a small or midsize client base who are looking for an exit strategy. The firm now consists of 30 adviser groups that manage $80 billion.

The numbers are on his side. According to a study in August from Cerulli Associates, 43 percent of advisers are over 55; the average age is 51. An earlier Cerulli report found that advisers over age 60 control $2.3 trillion in wealth.

In addition, the industry is failing to attract enough younger advisers. A study from the Oechsli Institute, which consults with financial advisers, found that only 23 percent were under 40 — meaning there is a dearth of people who are working if you retire today who will still be working 30 years from now.

When clients find themselves transferred to a new adviser at a new firm or a younger adviser at the same firm, they have to ask questions to make sure the process has been handled in their best interest — and not just as a way for advisers to sell their books of business and pad their own retirements.

The most basic question should be asked before any transition occurs: What is the adviser’s plan? Not having one is a red flag that the adviser is not planning far enough into the future on that issue and maybe others.

There isn’t necessarily one right answer. It could be that the adviser is grooming a team internally to take over. Or the adviser has a close relationship with another adviser who has a similar approach. But what matters is that thought has been put into planning.

“A lot of advisers mistakenly think they can work forever,” said Matt Oechsli, president of the Oechsli Institute. “The whole Great Recession has been very trying on advisers. It’s forced advisers to really raise their game and provide much more competent wealth management services and, many times, to form teams.”

Paul Saganey, founder and president of Integrated Financial Partners, which manages $5 billion, said all his adviser teams were required to have succession plans for both retirement and less predictable events, like dying or becoming disabled.

Retiring advisers are expected to begin the transition process a year or two before the actual date in order to get clients comfortable with the new adviser. If the fit doesn’t work, the firm will look for another adviser for that client.

“Clients need to say, ‘My retirement is going to last 30 years. Where are you going to be?’ ” Mr. Saganey said.

Clients who are being moved to another adviser should assess the replacement as if they were looking for an adviser for the first time, said Stephen Horan, managing director and co-leader of the CFA Institute, which administers the chartered financial analyst designation. He said making sure the new adviser had the same style as the departing adviser was crucial if clients were going to be able to stick to their financial plans.

“If the person is internal and has been groomed you’d expect to see a lot of alignment,” Mr. Horan said. “Still, you want to get a sense of, is that new approach something I’d be comfortable with? Is it purely investment management or does it include other financial planning?”

Since many financial adviser relationships are long-lasting, either because of great service, inertia or the adviser was your college roommate, an adviser’s retirement is a great time for clients to assess how their needs have changed. After decades of accumulating wealth, they may be entering a phase where they will no longer have income and will be spending what they saved.

“I think you want to ask yourself what was it that made your old adviser relationship work, if in fact it did,” Mr. Horan said. “Was it their technical competence, or was it that they were a confidant? What would you be looking to replace?”

It’s clear from the economics of selling these practices that incoming advisers are counting on the imprimatur of their predecessors to succeed — or for clients to forgo a rigorous assessment out of comfort with or loyalty to their retiring adviser. Otherwise they would not be paying 2.4 times revenue, on average, for a business that was entirely based on clients who could easily move their money, and the fees it generates, elsewhere.

Brad Bueermann, chief executive of FP Transitions, which values adviser practices for sale, said client retention rates for fee-only businesses are in the 95 to 98 percent range, and clients who have been with a firm for at least 10 years are the least likely to leave. (The retention rates are lower for transactional practices that rely on the old stockbroker model of selling products and receiving a commission.)

“Unfortunately the predominant model in the market is not selling practices — it’s attrition,” Mr. Bueermann said. “Advisers want to stay and do it forever. Over time they wind down. Or the clients leave when the adviser stops returning their phone calls. Or the guy doesn’t have a plan and he wakes up one day at 72 and is speaking Martian.”

Staying on too long may come from a good place. It’s hard for many advisers to give up their clients.

Cheryl Witman, 65, who has run a financial planning firm with a partner in Fairfax, Va., for 20 years, started talking about transitioning her clients to Shawn E. Wilson, 37, at Integrated Financial Partners, about a year ago. The impetus, she said, was that five of her clients received cancer diagnoses in the same year.

She felt that her 300 clients would fit well with Mr. Wilson’s 250 clients because of his financial planning credentials and approach to investing. But she also liked the firm’s retirement income software, which she did not have.

So far, she said, her clients have appreciated her concern for their financial futures. But she is in no hurry to set a firm retirement date yet.

Of course, many firms are facing the flip side of the client’s situation with a retiring adviser: Clients will eventually die and their heirs may not want to leave the money they inherit with the same firm.

Some firms are becoming more proactive at bringing in their clients’ adult children as clients in their own right — as opposed to treating them like future recipients of an inheritance.

Massey Quick, an adviser in New Jersey, is using this strategy to help its clients’ children get financial advice earlier than they might otherwise in their working lives.

“Our average client age is 55 to 60,” said Leslie C. Quick III, 61, founding partner. “We realized that if we were going to help them we’d have to develop relationships with the children.”

Yet, he added, there was a firm business reason behind it: “You obviously want to keep the relationship.”

Christopher B. Moore, 35, chief investment officer, said he often took the lead with younger clients. “I have a 2-year-old son, and my wife works full time,” he said. “A lot of the second-generation clients we’re working with are in similar situations. That helps us understand their priorities.”


Posted by:  Steven Maimes, The Trust Advisor


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Millionaires More Confident in US Economy: Survey

CNBC article by Eric Rosenbaum        

million surveyWhen it comes to the economy, America’s millionaires are an increasingly confident bunch.

More than 50 percent of wealthy investors believe the economy will be stronger one year from now, according to the just released CNBC Millionaire Survey. That’s up 9 percent from six months ago, when 42 percent of millionaires surveyed expressed a similar level of confidence.

Tom Wynn, director of affluent research at Spectrem, provided several factors for the increased confidence: the steady improvement in job growth, the steady increase in the major stock market indices since the spring, and a decrease in political ambiguity with the election season over, which has an effect on at least some people’s outlook. Wynn said this confidence extends to household income, household assets and company health. “In all of these areas, there has been an increase in confidence,” he said.

However, the rise in overall economic confidence among the wealthy has not translated into greater bullishness about the stock market.

Investors anticipate moderate growth of 5 percent to 10 percent in the stock market, similar to the findings in the March millionaire survey. It is still the largest percentage of investors who anticipate their assets will grow 5 percent to 10 percent in 2015.

The rest of affluent investors diverge in near-equal percentages: those who think the stock market will be flat in 2015 (16 percent) represent roughly the same portion of this demographic as those who are very bullish (17 percent), expecting the market to be up 10 percent to 15 percent in 2015.

Risks to wealth

A few primary areas of concern contributed to the modest stock market expectations of affluent investors.

Investors believe the greatest risk to the economy over the next 12 months is government dysfunction, followed by global unrest.

Republicans are more concerned about the national debt than Democrats. Democrats identify government dysfunction as a greater risk to the economy than Republicans. Democrats are also more concerned about global unrest than Republicans. Across party lines, government dysfunction is a large concern for baby boomers who are facing retirement.

Overall, Democrats are more optimistic about the economy over the next year than Republicans or Independents. Younger investors and Democrats are more optimistic about potential stock market growth in 2015 than Republicans or Independents.

The CNBC Millionaire Survey, conducted by Spectrem Group in November, polled 500 people with investable assets of $1 million or more, which represents 8 percent of American households.

Where will the S&P 500 end in 2015?

  • 56 percent: Of Democrats expect the S&P 500 to gain 5 percent to 10 percent in 2015.
  • 55 percent: Of the “semiretired” expect the market to be up 5 percent to 10 percent, making them significantly more confident than the “working” (43 percent) or “retired” (48 percent) segments.
  • 48 percent: Of millionaires expect the S&P 500 to be up 5 percent to 10 percent (down from 54 percent in March 2014). Among younger investors, the stock market confidence rises to 51 percent.
  • 21 percent: Of the wealthiest investors (more than $5 million in assets) are also the most confident in the stock market, expecting a return of 10 percent to 15 percent. Six percent of the wealthiest investors are betting on an even greater market gain (+15 percent).
  • 21 percent: Of women expect the market to be flat, significantly higher than the 13 percent of male millionaires who anticipate a flat market in 2015.
  • 11 percent: Of female millionaires expect the S&P 500 to be down by 5 percent to 10 percent, more than the 8 percent of men who lack market confidence.
  • 9 percent: Of millionaires expect the S&P 500 to be down by 5 percent to 10 percent (up from 7 percent in March 2014).
  • 5 percent: Of millionaires will increase investment in Vanguard Group funds in 2015, making its funds the “individual stock” that will see the most new investment in 2015—Apple, the most popular stock among millionaires, will see the same 2 percent in new investments as investors highlighted in March 2014.
  • 4 percent: Of millionaires expect the S&P 500 to be down by 10 percent to 15 percent—that doubled from 2 percent in the survey conducted last March.


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The Incredible Shrinking Incomes of Young Americans

The Atlantic news by Derek Thompson

savingsIt’s repetitive for some to hear, but important for everybody to know: You can’t explain Millennial economic behavior without explaining that real wages for young Americans have collapsed.

American families are grappling with stagnant wage growth, as the costs of health care, education, and housing continue to climb. But for many of America’s younger workers, “stagnant” wages shouldn’t sound so bad. In fact, they might sound like a massive raise.

Since the Great Recession struck in 2007, the median wage for people between the ages of 25 and 34, adjusted for inflation, has fallen in every major industry except for health care.

In retail, wholesale, leisure, and hospitality—which together employ more than one quarter of this age group—real wages have fallen more than 10 percent since 2007. To be clear, this doesn’t mean that most of this cohort are seeing their pay slashed, year after year. Instead it suggests that wage growth is failing to keep up with inflation, and that, as twentysomethings pass into their thirties, they are earning less than their older peers did before the recession.

The picture isn’t much better for the youngest group of workers between 18 and 24. Besides health care, the industries employing the vast majority of part-time students and recent graduates are also watching wages fall behind inflation. (40 percent of this group is enrolled in college.)

First: Why are real wages falling across so many fields for young workers? The Great Recession devastated demand for hotels, amusement parks, and many restaurants, which explains the collapse in pay across those industries. As the ranks of young unemployed and underemployed Millennials pile up, companies around the country know they can attract applicants without raising starter wages.

But there’s something deeper, too. The familiar bash brothers of globalization and technology (particularly information technology) have conspired to gut middle-class jobs by sending work abroad or replacing it with automation and software. A 2013 study by David Autor, David Dorn, and Gordon Hanson found that although the computerization of certain tasks hasn’t reduced employment, it has reduced the number of decent-paying, routine-heavy jobs. Cheaper jobs have replaced them, and overall pay has declined.

Your second question might be: Why have health-care wages been the exception to the rule? One answer is that health care is, generally speaking, the exception to many rules. Demand for medical services is dominated by the government (i.e. Medicare, Medicaid, and the employer insurance tax break), which doesn’t face the same vertiginous up-and-downs as the rest of the economy. So as the Great Recession steamrolled many industries, health care, propped up by sturdy government spending, kept adding workers. What’s more, computerization and information technology have yet to work their magical price-cutting power in health care as they have in other industries, for a variety of reasons. Americans are spending four percent less on food away from home than in 2007; but we’re spending 42 percent more on health insurance. As prices have increased, so have wages for younger workers in the medical field. (Update: Some readers have made the smart suggestion that money which might have gone to higher salaries has instead gone to paying higher health insurance costs.)

Once you account for falling wages among young workers—if you must: “the Millennials”—many mysteries of the economic behavior of young people cease to be mysterious, such as this generation’s aversion to home-buying, auto loans, and savings. Indeed, the savings rate for Americans under 35, having briefly breached after the Great Recession, dove back underwater and now swims at negative-1.8 percent.

Savings Rates Since 2004, by Age savings rate

Some of these young people could afford to save more, even if it’s a small share of their meager income, since small amounts of money put away several decades before retirement (or an unexpected emergency) can help later. But it’s easier to see why young Americans aren’t saving any more than we used to: Their wages are falling behind the cost of basic goods and many are going into debt to pay for a college degree.

The evaporation of real wages for young Americans is a real mystery because it’s coinciding with what is otherwise a real recovery. The economy has been growing steadily since 2009. We’re adding 200,000 jobs a month in 2014. That’s what a recovery looks like. And yet, overall U.S. wages are barely growing, and wages for young people are growing 60 percent more slowly than overall U.S. wages. How is a generation supposed to build a future on that?


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New York Advisory Firm Charged With Defrauding Investors

Reuters News

U.S. federal regulators charged a New York-based investment advisory firm and two co-owners with misleading clients into investing in a risky hedge fund.

The Securities and Exchange Commission (SEC) accused that Timothy Dembski and Walter Grenda of Reliance Financial Advisors misled clients who were retired or nearing retirement and living on fixed incomes to invest in a fund managed by Scott Stephan.

Stephan, who managed Prestige Wealth Management Fund, had “virtually no investing experience,” the SEC said. He has agreed to settle similar charges leveled against him.

Dembski’s and Grenda’s clients invested about $12 million in Prestige Wealth. The advisers are accused of telling clients that the fund used a sought-after trading algorithm to invest.

The algorithm did not work and the fund collapsed within two years since starting trading in April 2011, wiping out the vast majority of its investments.


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Melissa Rivers to File Multimillion-Dollar Wrongful Death Lawsuit

Page Six news by Julia Marsh and Laura ItalianoThe 55th Annual GRAMMY Awards - Pre-GRAMMY Gala And Salute To Industry Icons Honoring L.A. Reid - Arrivals

​Joan Rivers‘ daughter has selected a powerhouse Manhattan ​law ​firm ​and will file a multimillion-dollar medical malpractice and wrongful death lawsuit against the endoscopy clinic where ​the legendary comedian lapsed into a coma ​during a routine throat procedure, sources told The Post. ​The doctors involved in the procedure will also be named, sources said.​

​Melissa Rivers is finalizing paperwork with the Financial District firm Gair, Gair, Conason, Steigman, Mackauf, Bloom & Rubinowitz, the sources said.

The boutique firm, founded in 1919 making it one of the oldest in the city, is highly selective about its caseload and has a reputation for meticulous trial prep.

​A rep for Gair declined to comment.

Medical malpractice lawyer Robert Vilensky, who is not involved in the​ pending Rivers litigation​, said he expects Gair to charge the Yorkville Endoscopy clinic and all the doctors involved in treating Joan with not properly monitoring her Propofol, a sedative administered before the procedure. ​It is the same potent drug that Michael Jackson ​overdosed on.

​Rivers’ official cause of death is “anoxic encephalopathy due to hypoxic arrest during laryngoscopy and upper gastrointestinal endoscopy with propofol sedation.”

The 16-lawyer firm first needs to obtain Joan’s medical records before filing a case in Manhattan Supreme Court.

Joan’s will also needs to be be submitted to court and an executor appointed by a judge before the suit commences.

Vilensky told The Post that Gair’s firm, which represented the family of police shooting victim Amadou Diallo, has a reputation for being “low key” but also “very, very meticulous and very, very smart.”

They won $3 million for the Diallo family and recen​​tly scored a whopping $27.5 million verdict for a New York City woman who was run over by an MTA bus.

Still Vilensky said malpractice suits are tough to win because all medical procedures carry risks.

The legendary funny​woman died on Sept. 4 after going into cardiac arrest at the clinic on Aug. 28. She was 81.


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11 Fundamental Elements of a Stress-Free Estate Plan

Forbes article by Mark Eghrari 

estate-plan_4It’s easy to assume estate plans are intended to deal with future concerns: planning for retirement, providing an inheritance for loved ones, planning for Medicaid eligibility, avoiding estate taxes… all the “someday” stuff.

But your estate plan can eliminate (or at the very least reduce) one issue that is very much of the present: stress and worry.

Our clients typically walk out of the office breathing huge a sigh of relief. Why? They’ve created a plan that protects their assets and provides for their loved ones. They know their families are taken care of if the worst happens. (Among all the things that create stress, worries about your family’s future are clearly at the top of the list.)

So what goes into creating an effective estate plan? Every individual’s needs are somewhat different, but there are a number of basic elements you should ensure are covered besides deciding whom will receive what:

  1. Determine who you wish to manage your affairs if you become disabled, incapacitated, or pass away. (A well-structured plan also clearly defines the meaning of “incapacity” so that everyone involved understands what circumstances mean your agent will step in.)
  2. Plan for the demands on your estate if you must enter a nursing home or receive significant long-term healthcare… and for the affect of Medicaid on your financial needs.
  3. Avoid probate, both during your lifetime and when you pass away.
  4. Protect children from your prior marriage in case you pass away before your present spouse.
  5. Protect assets inherited by your heirs from lawsuits, divorces, and other claims against them.
  6. Create a financial framework and oversight for children and grandchildren who may be too young or inexperienced to effectively manage an inheritance.
  7. Provide for children or grandchildren with special needs or in special circumstances.
  8. Protect a portion of your estate if you pass away and your surviving spouse remarries.
  9. Address the different needs of each of your children (if you so choose.)
  10. Prevent (or at least discourage) challenges to your estate plan.
  11. Plan a family estate plan for blended families (families containing children from previous marriages) that ensures all children are provided for according to your desires and intentions.

Are there other considerations? Of course – but these are some of the basics. (Again, your individual needs will vary depending on your unique circumstances.)

But think of it this way: wouldn’t knowing someone will step in if you become incapacitated create a little peace of mind? Wouldn’t knowing that your family is taken care of create even more peace of mind? Wouldn’t knowing there is a plan in place – a plan you developed – if something happens to you take a significant weight off your shoulders?

Of course it would – and that’s why estate plans are as much about today as they are about the future.


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